Case study

Boxfresh is a fast-growing clothing company whose invoice financer has helped its exports

12:01AM BST 08 Jun 2004

Boxfresh has become a familiar clothing brand lately and its popularity is reflected in turnover at its wholesale business rising from £2.5 million to more than £10 million in the past five years, supplying some 300 retailers around the UK.

Many of them are major multiples and, as finance director Siva Sivaraman says, "they have their fixed payment terms - 60 days or whatever - and there are other retailers with whom we have 30-day agreements. But, lo and behold, it doesn't quite work that way, whereas our suppliers are squeezing us for settlement on time."

To resolve this imbalance, London-based Boxfresh went to HSBC for invoice finance, paying the equivalent of about 1.5pc of its sales, which covers a service charge, the money that is advanced and credit insurance. Mr Sivaraman says it is a one-stop finance shop for Boxfresh with a major impact on cash flow as the average length of time it gets paid now has more than halved from 94 to 41 days.

"The minute the customer pays, that reduces the loan we have with HSBC and immediately my interest rate goes down," he adds.

He describes it as a joint effort and highlights the role of the one employee who liaises with the bank. "There's a definite need for an interface between HSBC and us," he says. "It's like doing away with the IT department. You can outsource it but you still need someone here co-ordinating the whole thing. We don't really need a fully-fledged credit control team but with a finance company, whoever takes on the factoring, you need to be working in partnership."

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As for HSBC, it must like what it sees, too - it backed a management buy out at Boxfresh last year. There are also less obvious benefits to the arrangement, such as the knowledge HSBC can impart from its experience elsewhere in the rag trade. The big bonus, however, is the bank's network overseas, since 20pc of Boxfresh's goods are exported to Europe and beyond.

"It's easier with someone with that level of knowledge and the language to go out and collect the money," says Mr Sivaraman.